Someone recently asked me - Is the long tail phenomenon in B2B making e-commerce better or worse?  There is no question that the exponential rise in the number of standards over the past decade is making B2B more complicated than ever before.  Considerable effort is required to migrate from traditional EDI to newer XML paradigms.  Even greater challenges exist for companies in different industries (e.g. manufacturing and banking) to perform document exchange as different standards are used.  So for many, the long tail is making B2B e-commerce more challenging, expensive and complex – in order words - worse.  But for others, the long tail is unlocking the potential to collaborate with business partners electronically in ways never before possible. 

Consider the case of Green Coffee XML.  Green Coffee XML is a standard utilized by coffee growers, brokers and buyers to ensure uniformity of contracts, bills of lading and other commercial documents.  There is a surprising degree of variability even within an individual product’s supply chain.  For example, there are nine different types of sales contracts in use within the coffee sector along with five different units of measure commonly applied to weigh the beans.  By developing an XML document set specifically designed for coffee imports and exports, the industry can achieve higher levels of efficiency for their specific business processes.  The Green Coffee organization reports benefits such as lower Days Sales Outstanding, higher perfect order fill rates and lower total landed costs.  In today’s economy with commodity prices rising rapidly, the financial benefits to be gained from optimizing a supply chain will be compelling to every CFO.

So what is the answer?  I would say that for those willing to invest the effort to master the new e-commerce paradigms the long tail phenomenon is making B2B more effective than ever.  Through the long tail standards, companies can gain operational efficiencies that provide a long term competitive differentiation in the marketplace…

Steve Keifer

© Copyright 2008 GXS, Inc.  All Rights Reserved.

The Long Tail gets Longer 

I was visiting a US consumer products brand leader a few weeks ago to present GXS view of market trends and best practices.  Of course, one of the concepts I introduced was my theory on the Long Tail of B2B Standards.  The chart actually initiated a provocative discussion on the varying e-commerce standards in use throughout industry today.  The discussion revealed to me that the tail is even longer than I originally anticipated…

This particular brand owner markets a variety of consumer packaged goods in the coffee category.    As a result, they engage in the purchase of ingredients such as green coffee beans from suppliers in Latin America and other parts of the world.  I was surprised to learn that there is actually an e-commerce standard that governs how contracts, pricing and transportation documentation is exchanged amongst buyers, sellers, brokers and shippers of green coffee bean products.  Over the past two weeks I have been researching this standard and have arrived at a number of fascinating insights about the coffee sector…

My Coffee isn’t Green it is Brown 

This is true.  The coffee we drink is not green.  It is dark brown or some might say black.  However, the coffee does not start out that color.  Coffee is created from green beans grown on coffee plants typically harvested in large commercial plantations.  The beans are actually wrapped in a fruit-like flesh while being grown.  Once harvested, the exterior is removed to reveal the bean itself.  Prior to roasting, the beans are soaked, cleansed then dried by air and sunlight.  The roasting process transforms the color of the bean from green to yellow then light brown.  As the bean expands in density and doubles in size it will eventually crack resulting in the powdery material which is used to produce the beverage we drink every day.

Green Coffee Association (1923-Present) 

The XML standards for the coffee sector are created by the Green Coffee Association (GCA), an industry organization which serves to promote the commercial and regulatory interests of coffee growers, brokers and buyers.  GCA provides the industry with a number of critical functions including:

• Standards to ensure the uniformity of coffee contracts, bills of lading and other commercial documents.
• Liaisons with third parties such as the International Coffee Organization and Coffee, Sugar and Cocoa Exchange.
• Lobbying with the governments of various countries to promote free trade policies devoid of import quotas and fixed pricing.
• Rules and procedures for the arbitration of disputes amongst buyers and sellers arising from order fulfillment discrepancies or payment delinquencies.

Green Coffee XML Launches 

On July 23^rd, 2001, GCA launched a series of XML schemas designed to digitize and standardize processes for buying, selling and transporting coffee.  Historically, contracts for coffee were processed on standardized forms purchased by the GCA and completed using a typewriter.  As computer automation evolved, GCA sought to develop a machine-to-machine e-commerce process for buyers and sellers to exchange orders, pricing and transportation data.  The XML standards prevent trading partners from designing their own forms which may not contain sufficient detail to fulfill an order to arbitrate a dispute.  The flexibility of XML offers the benefit of standardization, while offering buyers the latitude to specify a wide variety of tendering, payment, transportation, insurance, pricing and performance measurement terms in the contracts.   The GCA XML schemas can be exchanged directly over the Internet or through a third party network. 

Green Coffee Association in 1923

Why does Green Coffee need its own XML Standard? 

The commercial trade processes for coffee beans are much more complex than you might imagine.  Below are a few examples of the variability that can exist in terms and conditions for coffee contracts:

• Contract Types – There are nine different types of coffee contracts to accommodate a variety of sales scenarios for transactions outside, inside and at the border of the country of destination.
• Quantity – Bulk coffee can be measured in metric tons, long tons, pounds, kilograms or weight denominated bag sizes (e.g. 75 kg bag).
• Packaging – Coffee can be packaged into natural fiber bags, bulk container liners or synthetic fiber super sacks.
• Insurance and Freight – parties must agree upon who will pay for cargo insurance as well as freight charges such as currency adjustments or congestion surcharges.
• Technical Descriptions - including crop year, grade, color and moisture tolerances are used to specify quality levels.
• Quality Claims – must be filed within specified timeframes such as 15 days of discharge, tender or government clearance.
• Weighing – processes are typically agreed upon in advance to specify when, where, how and by whom coffee will be weighed for invoicing purposes.
• Position – the transfer of ownership can occur at five different points in the supply chain.  GCA refers to these locations as shipment, afloat, arrival, deliver and spot.
• Tender – transfer of ownership can only occur with the presence of the specified types and numbers of documents such as the bill of lading, insurance certificate and commercial invoice.
• Payment – Funds transfer can occur directly between buyer and seller on open account terms or by a bank facilitated transaction such as letter of credit.

The Green Coffee Association’s XML standard offers an excellent example of the Long Tail of B2B Standards.  The standard orchestrates a highly specialized set of business processes within an industry subsector.  Tremendous benefits can be derived from market participants as a result of the flexibility offered via the wide variety of tendering, payment, pricing and performance management terms that can be modeled in the XML.  Such benefits would not be practically achievable with a more generalized standard such as EDI… 

Steve Keifer

© Copyright 2008 GXS, Inc.  All Rights Reserved.